EDITORIALS THE HINDU DAILY IMPORTANT EDITORIALS 23/AUGI2018 PART -1 PRESENTED BY ISHAN (EDUCATOR ON UNACADEMY)
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dls tness s gamble
ing at windmils I.Tilting at windmills Topic- GS Prelims,GSM2 Context-Donald Trump's trade war ignores the complexity of world supply chains and glosses over issues within U.S. industry PIC CREDITTHE HINDU Page-8
1.TILTING AT WINDMILLS In U.S. President Donald Trump's simplistic world-view, slapping tariffs on the U.S.'s main trading partners Canada, China, the European Union, and Mexico_ will reduce U.S. Trade deficits, bring back well-paying manufacturing jobs, and make America great again. . This has such populist appeal-some 73% of Republican voters support the tariffs according to a PEW Research Center poll in July _ that pro-trade Republicans in Congress have largely been silent on the issue.
TRADE WITH CHINA Since China, for instance, exported some $505 billionworth of goods to the U.S. last year but imported only $130 billion,_Mr.Trump assumes that China could not match the escalation in tariffs since it has a weaker hand. In April, he tweeted,"When you are already lose." $500 Billio n DOWN,you can't This approach simply ignores the complexity of global supply chains. . It also glosses over underlying problems with the U.S. industrial structure. hese changes, rather than globalisation, are responsible for the stagnation of average U.S.wages in real terms for almost 40 years. Non-Chinese owned companies account for almost 60% of Chinese exports to the U.S. Much of this consists of very specialised parts required by U.S factories to make a variety of products ranging fr boats to computer routers ut-board motors for
Since these non-Chinese companies cannot easily relocate their operations to other countries, the net result is that the burden of the tariffs will be felt by consumers in the U.S. The Trump administration's imposition of a 20%tax on washing machines in February.ledto its pricegoing.upinus.stores by.16.4%, U.S. imports from China also include products which contain parts made in other countries. The Peterson Institute for International Economics estimates that 87% of computers and electronics, which constitute the largest share of Chinese exports to the U.S., includes parts and financing from other countries like South Korea, Japan, and the U.S. itself. So not only does this limit the negative impact on Chinese manufacturing practices, it also affects other countries. . Even before Mr.Trump imposed a 10% tariff on $200 billion worth of Chinese goods in July, South Korea's exports of cars and consumer electronics to China fell substantially.
According to Professor Mary Lovely of Syracuse University, U.S. merchandise exports from China account for only 3% of Chinese manufacturing revenue. And the impact of tariffs on a potential further diminished by a 7% fall in the value of the Chinese currency. n of these exports i:s . Beijing also has more than $I trillion in foreign currency reserves to cushion the brunt of a trade war with Washington. The retaliatory tariffs China has imposed on U.S. products have also had a negative impact on German car producers in the U.S. where BMW has its largest factory in Spartanburg, South Carolina rather than in its home country. .By raising duties on soybeans and pork, it has struck at Mr.Trump's key constituencies of support in the U.S. midwest. Beijing's tariffs even hit Kentucky bourbon to increase pressure on the Senate majority leader Mitch McConnell who represents that State.
Similarly, the 25% tariff imposed on Mexican steel exports to the U.S. has had no impact on the Mexican automobile industry. The northern Mexican city of Matamoros produces 90% of all steering wheels used in U.S. vehicles and the city is also the largest producer of windshield wipers in North America. Instead, these tariffs by raising the cost of production compelled U.S. companies to reduce employment! To be continued.
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